Articles Tagged With: FHA Closing Costs

October 10, 2013

FHA Loans For Building on the Borrower’s Own Land

EDITOR’S NOTE: This article was written before changes to FHA loan rules made the old FHA Lender’s Handbook referenced in this article obsolete. The new FHA Single-Family Home Loan Rules are found in HUD 4000.1 and there have been many updates and changes to FHA home loans including One-Time Close Construction mortgage rules. Learn about the most up-to-date information on FHA Construction loans for borrowers who want to build on their own lot. ——- (The information below is no longer up-to-date, but we retain the original article here for archival purposes.) A reader asks, “I am looking to move back home, to where my grandma resides. her home of 45+ years is in disrepair. I filed bankruptcy two years ago, the one where you dont make trustee payments. My question | more...

October 8, 2013

Minimum Down Payments for FHA Loans: A Reader Question

By Joe Wallace

A reader asks, “Chapter 7 bankruptcy discharged in Oct 2010. Credit score now around 670. The hardest thing I am finding is the ability to save for a down payment. What would be a minimum down payment that I would be required to have before I could get an FHA loan? Thanks.” Unlike VA mortgage loans, FHA home loans feature a minimum down payment, also known as a minimum cash investment. The down payment must not only be a certain percentage of the loan amount, but it is also required to come from approved sources that can be verified. Borrowers cannot, for example, take out a cash advance on a credit card or any other form of unsecured loan for the down payment. FHA loan rules describe the minimum down | more...

October 2, 2013

Bad Credit FHA Loans? A Reader Question

By Joe Wallace

We get a lot of questions about FHA loans and bad credit. One of the latest examples comes from a reader who asks; “I am wanting to buy me a single family home but my credit is messed up. I know my score is bad! I am a single mother with 4 kids and I want my own house. I am in need of help on which way to go. Do I need to file chapter 13 or 7 or is there a way to get my credit fixed so that I can make another one of my dreams come true? Help me please.” While we cannot advise or answer questions on issues that fall outside how FHA loans work and their related issues (appraisals, Private Mortgage Insurance, etc.) | more...

September 27, 2013

FHA Loans, Credit Scores, and Your Repayment History

By Joe Wallace

One common type of question we’ve been asked as of late has to do with a borrower’s chances at getting an FHA loan approved in spite of bad credit, past financial difficulty, or a combination of both. There are many important things to understand about credit, but one of the most important for any borrower interested in an FHA should know about? The FHA’s attitude towards on-time bill payment, past financial difficulty, and related issues. The FHA loan rulebook, HUD 4155.1 says in Chapter Four, Section C, “Past credit performance is the most useful guide to • determining a borrower’s attitude toward credit obligations, and • predicting a borrower’s future actions.” That’s a basic general guideline, as is the next line from Chapter Four. “Borrowers who have made payments on | more...

September 26, 2013

FHA Loan Rules on Special Forbearance

By Joe Wallace

The FHA recently updated its rules associated with foreclosure avoidance and loss mitigation on FHA mortgages; borrowers who get into financial difficulty and may have trouble paying their FHA insured home loans should contact their loan officer immediately to discuss options for avoiding foreclosure. The newly updated FHA loan rules in this area include something known as Special Forbearance. Special Forbearance is described by the FHA as, “a written agreement between a mortgagee and mortgagor to reduce and/or suspend mortgage payments.” According to the most recent guidance from the FHA, “A Special Forbearance is available only to mortgagors who are unemployed. Special Forbearance agreements must provide for a minimum of 12 months for re-employment and require subsequent evaluation for a more permanent Loss Mitigation option to cure the default.” This | more...

September 24, 2013

FHA Updates Foreclosure Prevention Program

By Joe Wallace

On Friday September 20, 2013, the FHA issued a Mortgagee Letter that updates its Loss Mitigation program options. The new Mortgagee letter, ML 2013-32, overrides a previous mortgagee letter issued in 2012. The changes are designed to, “help reduce the number of full claims against FHA’s Mutual Mortgage Insurance Fund by assisting a greater number of distressed mortgagors in retaining their homes; thus, Mortgagee Letter 2012-22 will remain effect until servicers are able to fully implement this Mortgagee Letter.” The Loss Mitigation Program was established by the FHA in 1996, “to ensure that distressed FHA mortgagors were afforded opportunities to retain their homes and to assist in minimizing losses to FHA’s Mutual Mortgage Insurance Fund”. The most recent changes include a variety of program modifications. Keep in mind that the | more...

September 19, 2013

FHA Home Loan Debt To Income Ratio Rules: A Reader Question

By Joe Wallace

A reader asks, “I have significant student loans, but my parents make all payments on the loans because they had promised to provide my education as a gift (this was a commitment they made before I made the decision to pursue my education).” “They have made timely payments for three years, and they intend to continue to make payments until the loans are paid off. Can they guarantee future payments so that I can remove the loans from my debt-to-income ratio?” There are two basic factors at work when the lender is reviewing a borrower’s debt-to-income ratio. One is the borrower’s current debt load compared to the amount of income coming in. The other is how the new FHA loan payment would affect that debt load. Since the debts in | more...

September 18, 2013

FHA Loan Reader Questions: Old Foreclosures

By Joe Wallace

A reader asks, “Is a person eligible for an FHA loan if they had one 20 years ago that went into foreclosure?” FHA loan rules address the issue of past foreclosures on FHA home loans in HUD 4155.1, Chapter Four Section A. It states: “If the borrower has had past delinquencies or has defaulted on an FHA- insured loan, there is a three-year waiting period before he/she can regain eligibility for another FHA-insured mortgage.” Additionally, “The three-year waiting period begins when FHA pays the initial claim to the lender. This includes deed-in-lieu of foreclosure, as well as judicial and other forms of foreclosures. Lenders should contact the Homeownership Center (HOC) having jurisdiction over the area where the property subject to default is located for information such as the • date | more...

September 17, 2013

FHA Reverse Mortgage (HECM) Guidelines: Credit Issues

By Joe Wallace

Recently the FHA issued new rules and instructions to the lender that affect how FHA Reverse Mortgages or Home Equity Conversion Mortgages are processed. According to FHA Mortgagee Letter 2013-28, effective for all HECM case numbers assigned on or after January 13, 2014, the lender, “must perform a financial assessment of all prospective mortgagors on all HECM transaction types, i.e., traditional, refinance, and purchase.” What does that mean for the HECM loan applicant? For starters, when you apply for an FHA reverse mortgage or HECM, the lender is charged with doing the following things with your application data according to Mortgagee Letter 2013-28: performing the credit history analysis. performing the cash flow/residual income analysis; documenting and verifying credit, income, assets and property charges evaluating extenuating circumstances | more...

September 13, 2013

Can a VA Borrower Have More Than One FHA Loan at a Time? The Rules

By Joe Wallace

One of the more common questions we’ve been asked recently is connected to FHA loan rules about investment properties and whether or not an FHA borrower can have more than one FHA-insured home loan at a time. According to the FHA official site, “To prevent circumvention of the restrictions on FHA-insured mortgages to investors, FHA generally will not insure more than one mortgage for any borrower (transactions in which an existing FHA mortgage is paid off and another FHA mortgage is acquired are acceptable).” There are some exceptions, though. The FHA official site features a Q&A section about FHA loans that includes this quote, saying “We do not object to homebuyers using FHA mortgage insurance more than once if compatible with the homebuyer’s needs and resources” as described by FHA | more...